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Redstone closes door on annus horribilis

Microscope contributor

The extent of Redstone's troubles have been laid bare by financial results that reflect the tough economic climate and its unclear strategy in fiscal 2010.

In the 12 months to 31 March, Redstone made an adjusted EBITDA loss of £1.9m compared to an £800,000 profit a year earlier, principally due its troubled i4e BSF unit which is now to be closed.

Sales from continuing operations fell more than 20% during the period to £97.6m as operating losses declined by 55.8% to £11.7m and bank debts dropped to £18m compared to £30.25m.

Reporting for the first time as chairman, Ian Smith said Redstone Converged Solutions - the former Converged and Comunica businesses - recorded EBITDA of £2m, up 100%.

"The performance of this division was largely underpinned by recurring revenues provided by our contractual managed services and maintenance business," he said.

The Managed Solutions division traded "solidly despite difficult market conditions", filing EBITDA of £1.4m, a marked improvement on the £200,000 growth in H1.

The Technology division also contributed to the business, providing £400,000 EBITDA in spite of what Smith described as a "severly constrained market following the economic downturn witnessed in Ireland, where as a result turnover decreased by 33.5% to £9.3m"

However, it was Redstone's i4e division set up in January to manage the BSF Birmingham contract that materially impacted profts, making an EBITDA loss of £2.3m, of which £1.8m related to its exit of the BSF contract in Lancashire.

As revealed yesterday, the integrator has novated its BSF Birmingham contract to construction firm Bovis Lend Lease and all staff in the i4e division have transferred over except its MD and CFO.

However, there are reasons for shareholders to be cheerful; Smith, who came on board with chief executive Tony Weaver in August, has clearly seen some potential in the business to use it as a vehicle to roll up a managed security services specialist.

Smith said that on arrival it became apparent the business was too highly geared which had impacted its "credit rating and perceived risk profile" in the market.

During their relatively short tenure, Redstone has secured £8.5m of funds from the City and restructured its bank debt.

"The board firmly believes that Redstone ... provides a platform where significant value can be unlocked through the disposal of non-core and low margin assets and activities, together with sensible consolidation of duplicated processes," said Smith.

One factor Redstone management cannot control though is the continued weakness in the economy.

"The economic environment continues to be difficult, with the full impact of the government spending cuts to be announced shortly and taxation increases soon to impact the economy," said Smith.


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